Zimbabwe’s inflation rate soared in January, driven by higher food and housing costs alongside the introduction of new taxes. Official data from the Zimbabwe National Statistics Agency on Tuesday revealed sharp increases in both U.S. dollar and local currency terms.
Inflation in U.S. dollar terms surged to 14.6% year-on-year, up from 2.5% in December. Meanwhile, local currency inflation climbed to 10.5% month-on-month in January, compared to 3.7% in December.
Independent economist Prosper Chitambara attributed the spike to the lingering effects of last year’s regional drought and the government’s new tax measures. “The drought has driven up food prices, while the added tax burden is being passed directly to consumers,” he explained. “Inflationary pressures are likely to persist until the next harvest season.”
Finance Minister Mthuli Ncube’s latest budget introduced a 0.5% tax on fast food and a 10% tax on sports betting proceeds, both of which took effect in January.
Another economist, Tony Hawkins, said the sharp increase in U.S. dollar inflation reflects the government’s delayed acknowledgment of inflationary pressures. “Dollar inflation has been grossly understated, and authorities are now playing catch-up,” Hawkins said.
Zimbabwe introduced a gold-backed currency in April 2023 as part of efforts to stabilize its economy. However, the currency was devalued in September, and the U.S. dollar remains the dominant medium for transactions.
As of Tuesday, the Zimbabwe Gold currency had depreciated further, trading at 26.3 to the dollar, according to the central bank’s data. The worsening inflation adds to the economic challenges faced by the Southern African nation, with citizens feeling the brunt of higher costs across essential goods and services.
